Ignacio Herrera Anchustegui

Impact of Public Procurement Aggregation on Competition: Risks, Rationale and Justification for the Rules in Directive 2014/24

This paper assesses the risks, rationale and justification for the rules on centralisation and aggregation of public procurement in Directive 2014/24. The paper explores the justifications advanced for the aggregation of purchasing and the countervailing risks it generates. In both cases, it focuses in economic and administrative aspects. It then proceeds to a summary overview of the new rules for the aggregation of public procurement in Directive 2014/24, and emphasised how the Directive is expressly recognising possibilities that clearly exceed the more modest approach in Directive 2004/18. Moving on, it then focusses on the potential justification for certain activities now permitted by the 2014 rules, and engages in a critical assessment of their competitive impact. The paper briefly highlights the far-reaching and not necessarily positive implications that a maximisation of the centralisation and aggregation possibilities under Directive 2014/24 could have, and proposes that strict competition law enforcement will be necessary to avoid undesired consequences. Some suggestions for further research are provided by way of conclusions.

How the Uber & Lyft Case Provides an Impetus to Re-Examine Buyer Power in the World of Big Data and Algorithms

For competition lawyers, Uber is an interesting subject to study. Not only does Uber change the dynamics of the transportation market but it also raises interesting competition law questions. Last year for example, a class action suit against Uber in New York raised the question whether Uber is possibly arranging a hub and spoke cartel amongst the drivers by coordinating their selling prices. 2017 has continued to be litigious and interesting. One of these new class action lawsuits might also raise thought-provoking antitrust issues related to big data and buyer power. Uber, the maverick firm that revolutionized passenger transportation services across the world has been now sued over its alleged use of its “Hell” software before the U.S. District Court for the Northern District of California filed on April 24th, 2017. The suit alleges a breach of privacy laws due to interception of private communications and unfair competition. This software apparently allowed Uber to track Lyft drivers, its main competitor, create fake Lyft accounts, determine which drivers drove for both companies, and “execut[e] a plan meant to entice double-appers to drive exclusively for them”. In this paper we explore such behaviour from a different perspective, the antitrust one. The focus of this paper is on exploring relevant behavior from a buyer power-oriented focusing on reverse rebates and overbuying, while not engaging in a concrete analysis of Uber’s conduct. This analysis provides us with the opportunity to re-explore traditional antitrust concepts, anchored on the purchasing of raw material, in the data and algorithm driven world, in particular, how companies can use big data in anticompetitive strategies, such as granting supra-competitive bonuses, overbuying, and raising rival’s costs through overbuying input.

The Social Market Economy and the European Union

The German Ordoliberal School of Economics - also known as the Freiburg School - has had a profound influence in shaping Germany’s economic system and directly impacting the European integration process and single market model through two of its most well-known postulates: an Ordoliberal Competition Policy, and the Social Market Economy [For a discussion of Ordoliberal Competition in English see: 1; 2; 7; 8; 9; 10; 11]. In this short contribution I aim at introducing the Social Market Economy, discuss its origins and contents as well as highlighting its influence on the design of the European economic system by analyzing its impact in the provision of Services of General Economic Interests (‘SGEIs’).

Market Definition in Buyer Power Cases: Revisiting Some Traditional Views

Market definition and market power assessment are two fundamental steps carried out by competition authorities – and later on reviewed by courts – whenever dealing with alleged breaches of competition law by undertakings. They are, however, mostly centered in selling side cases. This paper puts forward that a mere reverse of the standard methodologies employed for selling side cases are insufficient for the application in buyer side cases. Thus, it is necessary re-assessing the current techniques and their application to be applied to buyer power cases. I submit that in all buyer power cases the market definition ought to be made in both the upstream market and downstream market by adopting a dualistic market definition in buyer power cases. Particular attention ought to be paid to the circumstance of whether the undertaking has market power in the downstream market as this will directly affect whether the conduct is anticompetitive or not. Lastly, this dualistic definition is justified as it fully captures the competitive effects of monopsony or bargaining power and allows for a proper appreciation of buyer power’s welfare effects from a consumer’s perspective.

Division into Lots and Demand Aggregation – Extremes Looking for the Correct Balance?

Directive 2014/24 aims at increasing efficient public spending and ensuring best value for money for contracting authorities. To achieve these goals the Directive promotes fostering small and medium enterprises (SMEs) participation in public procurement tenders, and adopting a demand aggregation policy. The 2011 Proposal incorporated as specific SME-friendly tool a suggestion to divide public contracts into lots which resulted in the adoption of Article 46 in the 2014/24 Directive. This rule comes as a compromise between a position proposing a “near total obligation” for contracting authorities to divide contracts and a softer approach. As a result, division into lots is not mandatory in all cases, but Member States can impose an obligation to divide procurement requirements into lots for certain contracts under national law. Concomitantly, the 2014 Directive also promotes and encourages demand aggregate techniques such as framework agreements, dynamic purchasing system, centralised purchasing and joint procurement. However, by aggregating demand to reduce costs and increase buyer power contracting authorities are not incentivized to divide contracts into lots, and therefore, SME participation may be hindered and competition in the long term impaired. This contribution discusses how these provisions have been incorporated into Directive 2012/24 and which stakeholders have shaped their contention; also the contribution shows how there is a clash between these trends to raise awareness on the need of balancing them to avoid a policy conflict.